Port Qasim Electric Power Company Ltd (PQEPC), jointly owned by China’s Sinohydro Resources Limited and Qatar’s Al Mirqab Capital Limited, has sent a default notice to the Central Power Purchasing Agency (CPPA) over the authority’s failure to pay over $263 million in pending dues.
According to PQEPC’s chief executive officer (CEO) Guo Guangling, the total confirmed due amount that CPPA owes the power company as of May 15 was Rs. 77.3 billion or $263.5 million, reported Dawn.
If CPPA fails to pay up within 35 days of the notice, it would constitute a power purchaser event of default.
The power producer has ordered that the purchasing agency make a $73.6 million principal payment by today to prevent a “facility agreement default” as well as a “GoP default.” PQEPC CEO said the company requires a constant and large amount of cash flow to purchase coal and clear overdue amounts with coal suppliers for sustainable operations.
Separately, Engro Powergen Thar Limited (EPTL), which runs on local coal, has informed the CPPA that it could suspend full operations due to a severe liquidity crunch that has made it difficult for the power company to satisfy its commitments with lenders and suppliers.
CPPA owes Rs. 65.5 billion to EPTL. The firm has asked that the agency make a payment of Rs. 28.7 billion by May 31 (today) in order to avoid a debt servicing default.
The dollar crisis in Pakistan has amplified the money troubles faced by Chinese Independent Power Producers, as the government deducts capacity charges due to their inability to produce the desired amount of electricity, while it also refuses to repay outstanding dues. It is possible that if the situation worsens, the Chinese power companies operating on the CPEC belt may initiate force majeure against the state’s failure to address the ongoing liquidity crisis.
The issue of the spiraling circular debt is currently between Rs. 330 billion and Rs. 350 billion. With no contingencies in place to offset losses faced as a result of inflationary and poor policy decisions, the government’s capacity payment deductions and the accumulation of circular debt are hurting the energy business.